There is clearly a difficult tradeoff here concerning lives versus material goods, with very little discussion about how this tradeoff should be assessed and acted upon.
NBER WORKING PAPER SERIES
THE CORONAVIRUS AND THE GREAT INFLUENZA PANDEMIC: LESSONS FROM THE “SPANISH FLU” FOR THE CORONAVIRUS’S POTENTIAL EFFECTS ON MORTALITY AND ECONOMIC ACTIVITY
Robert J. Barro José F. Ursúa Joanna Weng
Working Paper 26866 http://www.nber.org/papers/w26866
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Cambridge, MA 02138
Implications for the Coronavirus Pandemic
The Great Influenza Pandemic of 1918-1920 represents a plausible worst-case scenario for disease outbreaks with global reach like COVID-19. Our findings show that, keeping everything else constant, the flu death rate of 2.0 percent out of the total population in 1918-1920 would translate into 150 million deaths worldwide when applied to the world’s population of around 7.5 billion in 2020. Further, this death rate corresponds in our regression analysis to declines in the typical country by 6 percent for GDP and 8 percent for private consumption. These economic declines are comparable to those last seen during the global Great Recession of 2008-2009. Thus, the possibility exists not only for unprecedented numbers of deaths but also for a major global economic contraction. The results also show that the 1918-20 pandemic was accompanied by substantial short-term declines in real returns on stocks and short-term government bonds, driven by declines in economic activity and also higher inflation.
At this point, the probability that COVID-19 reaches anything close to the Great Influenza Pandemic seems remote, given advances in public-health care and measures that are being taken to mitigate propagation. In any event, the large potential losses in lives and economic activity justify substantial expenditure of resources to attempt to limit the damage. In effect, countries have been pursuing a policy of lowering real GDP—particularly as it relates to travel and commerce—as a way of curbing the spread of the disease. There is clearly a difficult tradeoff here concerning lives versus material goods, with very little discussion about how this tradeoff should be assessed and acted upon.